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***Russia, China and the Geopolitics of the Silk Road – Marcia Christoff-Kurapovna
20 april
The most prominent feature of the geopolitics of Russia and the West pivots upon a relatively obscure feature of the geopolitics of Russia and China. The mainstream media in the U.S. has covered minimally and only rather incidentally the estimated $900 billion construction of a complex matrix of strategic transport routes known generally as the “New Silk Road” or the “Belt Road Initiative” (BRI) project initiated by Beijing in 2013. It is one of the largest infrastructure and investment mega-projects in history, covering more than 68 countries, equivalent to 65% of the world’s population and 40% of the global GDP as of 2017.
——————————————————————————————————Weekend Reading: The Return Of Stagflation – Lance roberts
20 april
One of the worst possible outcomes for the U.S. economy, and ultimately for investors, is stagflation. Of course, if you weren’t around in the 60-70’s, there is a reasonably high probability you are not even sure what “stagflation” is. Here is the technical definition:
“stagflation – persistent high inflation combined with high unemployment and stagnant demand in a country’s economy.”
How can that happen? Exactly in the way you are witnessing now.
While the current Administration is keen on equalizing trade through tariffs, trade deals, and trade deficit reduction, they have also embarked on a deficit expanding spending spree which has deleterious long-term effects on economic growth. At the same time, the administration is attacking our major trading partners, particularly China, leading to a push to shift away from the U.S. dollar as a reserve currency.
——————————————————————————————————International transmission of monetary policy via banks: New cross-country evidence from the International Banking Research Network – Claudia Buch, Matthieu Bussière, Linda Goldberg, Robert Hills
20 april
The channels through which one country’s monetary policy affects the international economy are still not that well understood. This column presents findings from latest project of the International Banking Research Network, which reveal that monetary policy spillover effects via bank lending are significant across countries in both conventional and unconventional periods. While the results provide some support to the bank lending and portfolio channels traditionally studied in the literature, they also suggest that other bank-level frictions matter.
——————————————————————————————————Visualizing The Pension Time Bomb: $400 Trillion By 2050 – Tyler Durden
20 april
Are governments making promises about pensions that they might not be able to keep?
According to an analysis by the World Economic Forum (WEF), there was a combined retirement savings gap in excess of $70 trillion in 2015, spread between eight major economies.
As Visual Capitalist’s Jeff Desjardins notes, The WEF says the deficit is growing by $28 billion every 24 hours – and if nothing is done to slow the growth rate, the deficit will reach $400 trillion by 2050, or about five times the size of the global economy today.
The group of economies studied: Canada, Australia, Netherlands, Japan, India, China, the United Kingdom, and the United States.
——————————————————————————————————How High Is The Risk of a Currency Crisis? – Thorsten Polleit
21 april
“The reports of my death are greatly exaggerated”, quipped Mark Twain in response to a newspaper report that said he was on his deathbed. The same could be said about many fiat currencies. Whether we are looking at the US dollar, the euro, the Japanese yen or the British Pound: In the wake of the financial and economic crisis of 2008/2009, quite a few commentators painted a rather bleak future for them: high inflation, even hyperinflation, some even forecast their collapse. That did not happen. Instead, fiat money seems to be still in great demand. In the United States of America, for instance, peoples’ fiat money balances relative to incomes are at a record high.
——————————————————————————————————The limits of central bank cooperation: Evidence from the Gold Pool (1961-1968) – Michael Bordo, Eric Monnet, Alain Naef
18 april
Central bank cooperation has once again become a central issue amid the Global Crisis and the persistence of global imbalances, but there are few examples of successful cooperation schemes that survived the test of time. This column argues that the Gold Pool of 1961-1968 offers a unique example of integrated financial cooperation between major central banks. It failed not due to members freeriding, but because they did not have to abide by any rules-based policies to prevent imbalances.
——————————————————————————————————Buybacks redux – Jihn H, Cochrane
18 april
Two more points occur to me regarding share buybacks. 1)When buybacks increase share prices, and management makes money on that, it’s a good thing. The common complaint that buybacks are just a way for managers to enrich themselves is exactly wrong. 2) Maybe it’s not so good that banks are buying back shares. 3) The tax bill actually gives incentives against buybacks. What’s going on is despite, not because.

Recall the example. A company has $100 in cash, and $100 profitable factory. It has two shares outstanding, each worth $100. The company uses the cash to buy back one share. Now it has one share outstanding, worth $100, and assets of one factory. The shareholders are no wealthier. They used to have $200 in stock. Now they have $100 in stock and $100 in cash. It’s a wash.
——————————————————————————————————America Picks a Fight With its Largest Foreign Creditor – Doug FRench
17 april
Ex-Wharton student and WWE hall of famer, Donald J. Trump, is thinking $30 billion isn’t a large enough smackdown to those stealers of intellectual property (as if that’s a legitimate thing), the Chinese. Trump urged US Trade Representative Robert Lighthizer to aim bigly, warning those during the tariff powwow that they should prepare for an announcement during the coming weeks.(..)
President Trump continually tells crowds how smart he is. However, pursuing a trade war with your largest creditor, who just happens to have a financial system on the edge of insolvency, is a recipe for exploding interest rates and a financial meltdown. Brilliant.
——————————————————————————————————Petroyuan’s Crash at Birth – Mike Shedlock
22 april
The petroyuan has launched. Let’s investigate its success or lack thereof, primarily the latter.
Economist and book author Daniel Lacalle pretty much sees things the way I do regarding the petroyuan hype. Lacalle compiled some amusing stats in his post on the Petroyuan’s Lacklustre Birth.
Crash at Birth
Every time I read that the yuan is going to dethrone the dollar and that China is going to monopolize the oil market in its local currency, I remember those films and reports of the late 1980s predicting the imminent Japanese supremacy and how it would absorb the West. Today, more than two decades later, Japan continues in secular stagnation.
——————————————————————————————————Our Strange Attraction to Self-Destructive Behaviors, Choices and Incentives – Charles Hugh Smith
18 april
Self-destruction isn’t a bug, it’s a feature of our socio-economic system.
The gravitational pull of self-destructive behaviors, choices and incentives is scale-invariant, meaning that we can discern the strange attraction to self-destruction in the entire scale of human experience, from individuals to families to groups to entire societies.
The proliferation of self-destructive behaviors, choices and incentives in our socio-economic system is profoundly troubling. Exhibit 1 is the opioid epidemic (charts below). How did we reach this level of individual and social self-destruction?
——————————————————————————————————US-China Trade-War Threats Rattle Germany AG – Wolf Richter
17 april
But unlike the New York Fed yesterday, ZEW named names and pointed fingers.
Yesterday, I speculated about what might have caused the optimism of manufacturing executives in the New York Fed’s district to collapse by the most in the survey’s history. The forward-looking index plunged in the April survey more than it had during the worst month of the Financial Crisis.
The survey didn’t say why. So I speculated that it reflected the fear in Corporate America of a trade war between the US and China, not because US companies might see their exports to China get hit with retaliatory tariffs – there are woefully few manufactured exports from the US to China – but because Corporate America’s supply chains have been offshored to China and beyond, and the proposed US tariffs would make the components and materials more expensive for US manufactures, thus squeezing their profit margins extracted from offshoring.
——————————————————————————————————How communication technologies shape firms’ internal organisation and their productivity – Pauline Charnoz, Claire Lelarge, Corentin Trevien
22 april
Research has shown that lower communication costs can act as a centralising force, prompting workers tend to rely more on the help of others and to specialise on a narrower set of tasks. This column reveals how reduced travel times resulting from a new high-speed rail transport in France fostered functional specialisation across different units of firms and greater centralisation. The findings highlight the mechanisms determining the level and distribution of productivity in an economy, and their redistributive impact both between and within firms
——————————————————————————————————How Long Will Cheap Debt Bail Out Automakers? – Ryan McMaken
21 april
This week, the Commerce Department reported that consumer spending was heading upward, thanks in part to the strongest sales in six months for automobiles.
For the automobile industry, that’s reassuring, but the larger trend points to a period of stagnation.
In recent years, there’s been much speculation over whether or not Americans have gotten over their love affair with automobiles. We are often told that younger consumers (i.e., Millennials) don’t like cars, and will all move to Manhattan and take the subway, or ride Uber cars everywhere else they want to go.
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***This is How First-Time Buyers Get Squeezed by Rampant Home Price Inflation – Wolf
22 april
Millennials can go to the Fed and complain.
Home prices have been surging in many markets, mortgage rates have been rising, and incomes have plodded along with little growth, and the disconnect is getting bigger and bigger. This is not a problem for well-to-do Americans who’ve owned a lot of assets and benefited from the rampant asset price inflation over the past eight years, but it is a problem for those trying to buy a home based on their wages, especially first-time buyers, which now include more and more millennials.——————————————————————————————————